Gift from a friend (£35,000)

ab713

Hi All,

Asking this on behalf of my friend:

My friend A has helped his friend B for few years in trying to sell his plot but friend A wasnt successful. Finally, friend B plot was successfully sold via estate Agent's help. Friend B wants to gift Friend A (£35,000) as he never asked him any money. Friend A plans to save this money in the savings account.

Friend A doesnt own any business. He works in a full time employment. When the friend A receives the money from friend B..is that taxable? Will friend A need to declare it? Will he need to pay any tax on it?

Carrot007

Gifts are not taxable, however you will need proof of source of funds from the friend for AML purposes that may be triggered by the bank. Or indeed triggered when the money is used. If a gift does not include those it is not a gift.

ab713

So the proof can simply be that he sold the plot and he earned the money from it? He can provide solicitor letter of plot being sold.
Does my friend preserve the letter for few years or he submits to the bank or HMRC if they ask? Or is it the friends duty to submit the letter before either bank or HMRC asks?

Linton

It may avoid hassle later if the recipient can prove that it was a gift. Perhaps the simplest proof would be a signed/dated letter from the donor thanking him for his efforts and stating the value of the gift.

Gary1984

I'm no lawyer but if the gift is directly linked to 'his efforts' in such a letter could HMRC argue it was taxable earnings?

Thrugelmir

ab713 wrote: »

When the friend A receives the money from friend B..is that taxable?

Has friend B disclosed the taxable profit correctly to the HMRC? Gifting part of the net proceeds is not a tax deductible expense. HMRC take a great deal of interest in property transactions that are processed by the LR. Easier enough to marry up disposals to individuals tax returns.

Tom99

It will also count as a PET for IHT for the next 7yrs on B's estate less £3k/£6k depending how much B has already gifted this tax year and last tax year.

AnotherJoe

Just keep it very simple.
B transfers A £35k.
That's it. No need to notify anyone. Indeed it will likely cause complications if you do in case (say) HMRC misread it as payment. No tax is due *
Don't confuse the picture with plot sales etc, this is not relevant and again may be misread as payment for work selling the plot as per post above.
B can keep a short letter with their documents stating when the gift was made, to help the executors of B's will should B die before 7 years have elapsed.

* B should ensure they pay any tax due on the profits of the sale of the plot. What this woudl be could be complex depending on the details of the plot, but the gift doesn't come into it, there is no tax for a gift between individuals. Two different things

phillw

If you could legally do this, then every contractor would say they worked for 6 months but didn't complete the work & not submit an invoice, then later on the company felt sorry for them & so gifted them some money.

18cc

you can give anyone as much as you want at any time as a gift with no tax payable except maybe inheritance tax if death occurs eithin 7 years.

Linton

phillw wrote: »

If you could legally do this, then every contractor would say they worked for 6 months but didn't complete the work & not submit an invoice, then later on the company felt sorry for them & so gifted them some money.

The difference is that the contractor works on the expectation of being paid. As far as we know the helpful friend didnt. Difficult cases could end up being tested in the courts on the basis of likelihood with costs awarded to the winner. Neither the contractor nor the company would want to go down that route.